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Context:

Recent proposal within the Income-Tax Bill, 2025, to grant tax authorities access to an individual's "virtual digital space" during search and seizure operations.

Background

Current Legal Framework (Income-Tax Act, 1961) =>  Tax authorities possess powers for search and seizure operations. However, these powers limit to physical spaces like residences, offices, or bank lockers.

Proposed Income-Tax Bill 2025 => Introduces the crucial concept of an individual's "virtual digital space." Authorities can now access various online platforms, including emails, personal cloud drives, social media accounts, and digital application platforms. It also empowers tax authorities to override access codes, gaining entry into encrypted devices or virtual spaces.

Concerns

Extreme Intrusion => The existing law maintains a clear link between the objective (finding undisclosed income) and the physical assets. However, an individual's digital presence is vast and often contains much more than what is relevant to a tax investigation. Without clear limits, accessing digital space can lead to disproportionate intrusion into private lives.

Impact on Multiple Stakeholders => Unlike a physical search limited to an individual's property, accessing a digital account exposes a wide network. For example, accessing a social media account discloses information about friends, family, and professional contacts through photographs, posts, and conversations.

Threat to Professional Confidentiality => Concern for professionals whose work requires confidentiality.

• Journalists => Their devices and emails hold sensitive information, including confidential sources, unpublished material, and protected communications. A search on broad grounds violates their privacy and endangers their ability to report freely.
• Supreme Court's Stance => In 2023, the Supreme Court circulated interim guidelines on the seizure of digital devices, directing the Union Government to formulate necessary protocols.  

Contradiction with Constitutional Principles

Right to Privacy (Article 21) and the Proportionality Test => The Supreme Court of India, in Justice K.S. Puttaswamy (Retd.) v/s Union Of India judgment (2017), established privacy as a fundamental right under Article 21. This ruling mandates that any state action restricting privacy must satisfy a four-fold proportionality test:

• It must pursue a legitimate aim.
• It must be necessary for achieving that aim.
• It must adopt the least intrusive means available.
• There must be a rational nexus between the means adopted and the object sought to be achieved.

Granting unrestricted access to personal digital data, without warrants, clear relevance criteria, or judicial oversight, clearly fails this standard. It does not represent the "least intrusive means."

Judicial Interpretation of Search and Seizure => Even under existing laws, courts have consistently highlighted that search and seizure provisions must be exercised strictly, acknowledging they constitute a serious invasion of privacy.

• The Supreme Court, in 2023, circulated interim guidelines for the seizure of digital devices, urging the Union Government to formulate comprehensive protocols. This reflects a growing judicial awareness of the unique challenges posed by digital data.
• Courts also stress that "reason to believe" requires tangible material, going beyond mere suspicion, to justify such intrusive actions.

Global Standards and Best Practices

Canada => Charter of Rights and Freedoms guarantees the right to be secure against "unreasonable search or seizure." It establishes a strict three-part standard:

• Prior authorization: A warrant or similar legal instrument must be obtained beforehand.
• Approval by a neutral and impartial judicial authority: A judge, not an enforcement officer, decides if a search is justified.
• Reasonable and probable grounds: Strong evidence of a crime and its connection to the place or person to be searched must exist.

United States => The Internal Revenue Service (IRS) adopts the Taxpayer Bill of Rights, asserting that any enforcement action must be legally compliant and "no more intrusive than necessary."

• The U.S. Supreme Court's decision in Riley v/s California (2014) ruled that law enforcement generally needs a warrant to search digital data on cell phones seized from arrested individuals. The Court recognized the "deeply personal nature" and "immense storage capacity" of modern digital devices.

Way Forward

Refining the Definition => The government must narrow the open-ended definition of "virtual digital space" to ensure it targets only information directly relevant to the financial investigation.

Mandatory Judicial Oversight => Mandate for prior judicial warrants before accessing an individual's digital space is crucial, to ensure an independent review of the necessity and scope of the search.

Disclosure of Reasons => Mechanisms to disclose the "reason to believe" for digital access, at least to the individual concerned, enhances transparency and accountability.

Establishing Redress Mechanisms => Mechanisms for aggrieved individuals to seek redress for unwarranted or disproportionate digital searches are essential to protect citizens' rights.

Learning from Best Practices => India can learn lessons from international jurisdictions that have successfully balanced law enforcement needs with robust privacy protections.

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Source: 

THE HINDU